WASHINGTON, D.C. (March 22, 2017) – (RealEstateRama) — Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $575 on each loan they originated in the fourth quarter of 2016, down from a reported gain of $1,773 per loan in the third quarter of 2016, the Mortgage Bankers Association (MBA) reported today in its Quarterly Mortgage Bankers Performance Report.

“Rapid increases in interest rates in the last two months of 2016 slowed mortgage activity in the fourth quarter, driving a significant decrease in loan production profits,” said MBA Vice President of Industry Analysis Marina Walsh.

“Mortgage lenders reported a combination of both lower revenues and higher expenses. On the revenue side, secondary marketing income dropped as mortgage lenders wrestled with less favorable pricing and pipeline challenges. At the same time, production expenses per loan rose as fixed costs were spread over fewer loans,”

“Those mortgage lenders with servicing portfolios benefited from higher net servicing financial income in the fourth quarter due to increases in the valuation of their mortgage servicing rights, driven by the same rising interest rates. However, the reduced profitability on the production side of the business generally outweighed servicing gains,” Walsh continued.

Average production volume was $690 million per company in the fourth quarter of 2016, down from $764 million per company in the third quarter of 2016. The volume by count per company averaged 2,811 loans in the third quarter of 2016, down from 3,072 loans in the third quarter of 2016.

The average pre-tax production profit was 24 basis points (bps) in the fourth quarter of 2016, down from an average net production profit of 74 bps in the third quarter of 2016. Since the inception of the Performance Report in the fourth quarter of 2008, net production income has averaged 53 bps.

The purchase share of total originations, by dollar volume, was 58 percent in the fourth quarter of 2016, compared to 60 percent in the third quarter of 2016. For the mortgage industry as a whole, MBA estimates the purchase share at 49 percent in the fourth quarter of 2016.

The average loan balance for first mortgages was $246,473 in the fourth quarter of 2016, down from the previous study-high of $251,398 in the third quarter of 2016.

The average pull-through rate (loan closings to applications) was a study-high 76.45 percent in the fourth quarter of 2016, up from 73.33 percent in the third quarter of 2016.

Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 347 basis points in the fourth quarter of 2016, down from 365 bps in the third quarter of 2016. On a per-loan basis production revenues decreased to $8,137 per loan in the fourth quarter of 2016, from $8,742 per loan in the third quarter of 2016.

Net secondary marketing income decreased to 272 basis points in the fourth quarter of 2016, down from 291 bps in the third quarter of 2016. On a per-loan basis, net secondary marketing income decreased to $6,433 per loan in the fourth quarter of 2016, down from $7,037 per loan in the third quarter of 2016.

Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $7,562 per loan in the fourth quarter of 2016, from $6,969 in the third quarter of 2016. For the period from the third quarter 2008 to the present quarter, loan production expenses have averaged $5,900 per loan.

Personnel expenses averaged $5,001 per loan in the fourth quarter of 2016, up from $4,675 per loan in the third quarter of 2016.

Productivity decreased to 2.7 loans originated per production employee per month in the fourth quarter of 2016, from 2.9 in the third quarter. Production employees includes sales, fulfillment and production support functions.

Net servicing financial income improved to a year-to-date gain of $34 per loan in the fourth quarter of 2016 from a year-to-date loss of $122 per loan in the third quarter of 2016.

Including all business lines, 73 percent of the firms in the study posted pre-tax net financial profits in the fourth quarter of 2016, down from 94 percent in the third quarter of 2016.

MBA’s Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. 74 percent of the 353 companies that reported production data for the fourth quarter of 2016 were independent mortgage companies and the remaining 26 percent were subsidiaries and other non-depository institutions.

In addition to the fourth quarter report, the Annual Performance Report on 2015 data is also available. There are five performance report publications per year: four quarterly reports and one annual report. Media wishing to view a copy of either report should contact Ali Ahmad at (202) 557-2727 or ">. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field.

Recent MBA Press Releases

David H. Stevens, CMB, President and CEO of the Mortgage Bankers Association (MBA), released the following statement applauding Senate Banking Chairman Crapo (R-ID) and the bi-partisan coalition of senators that worked to ensure passage of S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act.